Feliks Kusaiev, CEO of MPS Technology: When consumers realise that buying cheap material undermines their own interests, it may be too late.
The Metalshub and Metis team had the privilege of speaking with Feliks Kusaiev, the CEO of MPS Technology, a leading ferrotitanium company based in Poland, along with its subsidiary, METPROMSERVIS, situated in Ukraine. Our discussion focused on the inception of their most recent project, driven by the obstacles posed by Russia’s full-scale invasion of Ukraine. Additionally, we explored the competitive landscape of their companies and gained insights into their outlook on future market developments.
In light of the war in Ukraine, your business has experienced many challenges. However, despite these hurdles, you managed to achieve significant success. Could you elaborate on how recent events have influenced your company’s development, particularly in relation to the establishment of the new company in Poland, MPS Technology?
The Polish project commenced in 2018, well before any possibility of a full-scale war was considered. Our main objective was to establish a raw material base within the EU to satisfy the needs of the Zaporizhzhia plant, facilitate FeTi trading through our warehouse in the EU, and, crucially, conduct transactions via a European legal entity.
Simultaneously, we aimed to advance titanium waste processing for its reintegration into alloys crucial for the medical and aerospace sectors. In Ukraine, we pursued similar endeavours. However, we faced severe challenges due to a limited and fragile market coupled with legislative obstacles such as high export duties on processed scraps, in particular.
The outbreak of war has forced us to make profound adjustments to our plans. While our progress in the vacuum direction remained steady due to our independence from Ukraine for raw materials, sales, or processing, our ferrotitanium plans demanded a comprehensive review. The interruption in logistics posed significant hurdles, compounded by personnel disruptions as some staff volunteered or were mobilised while others relocated to flee the war. Energy shortages and infrastructure disruptions made business forecasting and planning exceedingly tricky.
Consequently, we temporarily scaled down our ferrotitanium operations to maintain safe production and sales levels. Fortunately, our established product warehouse in Poland ensured timely delivery to customers under annual contracts.
Beyond safeguarding our business, this decision was essential for concentrating efforts and resources on future endeavours, such as establishing smelting capacities in Poland. This strategic move aimed to mitigate potential losses in Ukraine, safeguarding our business and clients.
The war in Ukraine served as a catalyst, propelling us beyond our comfort zone and accelerating our progress.
While it may be premature to label these adaptations as an outright success, I must emphasise that with a clear goal, motivation, a capable team, and cumulative expertise, success becomes inevitable, though.
How has the situation influenced your supply chain management strategies, especially with regard to sourcing raw materials?
This situation did not impact us because 90% of our raw material supplies are not of Ukrainian origin. The logistics between Poland – Ukraine – Poland became slightly longer due to queues at border crossings, but this is tolerable, especially when there are no Polish blockades.
We have lost a minor volume of raw material supplies in Ukraine. However, this has had no significant impact on Western business operations. Ukrainian business, on the other hand, has suffered losses. Currently, the plant operates to maintain jobs, but not at a loss; it covers its costs through tolling services provided to the Polish company.
Have you experienced any shifts in consumer behaviour or demand patterns for your products, and how are you addressing these changes?
Of course, consumer demand is gradually decreasing, but overall, we are not suffering greatly from this. Our expertise in the titanium industry helps us introduce new products, increasing our sales.
With the establishment of MPS Technology in Poland, what opportunities do you foresee for expanding your market presence in Europe, and what challenges do you anticipate in this process?
Since the introduction of smelting capacities in Poland, numerous European consumers have shown increased interest in our products. Situated within a unified economic zone, we mitigate the risks linked to production in Ukraine.
Moreover, goods produced within the EU are exempt from import duties in multiple nations, placing us on equal footing with competitors from Britain and other EU countries.
As for our aspirations, we eagerly anticipate further progress.
What key factors differentiate your companies from competitors in the market?
I may not be able to disclose all the key factors that make us more competitive compared to other manufacturers (not everyone needs to know this), but I can certainly mention some of them. First and foremost is the quality of our product. We produce practically all FeTi specifications that exist around the world. We can process even the most complex waste categories, a task that other companies would avoid. We can manufacture our products at a relatively low cost. We always adhere to precise delivery schedules for our customers.
We still have many advantages, but they are all related to economics and technology and involve commercial information.
Could you elaborate on the competitiveness of your products compared to those originating from Russia? How has your company adapted to their aggressive sales in 2023?
This question can be addressed briefly – I’m always in favour of letting gamblers go ahead, allowing them to stumble and lose money while we observe from the sidelines.
In reality, low-priced sales of Russian FeTi have had and potentially will have, a more significant impact on consumers, particularly those who acquired this discounted material.
Not everyone comprehends that this price distortion has adversely affected producers in the EU, limiting their ability to operate and earn. Russian production alone cannot fulfil the global demand for ferrotitanium, and when consumers realise that buying cheap material undermines their own interests, it may be too late.
This situation was beneficial to several traders – speculators. In a fair market, turning a profit becomes challenging for them. Nonetheless, I’m accustomed to operating under such conditions.
What are the primary factors that influence your pricing decisions? Do you rely on specific benchmarks to set prices, or is it rather cost-based than market-based pricing?
The main drivers behind our pricing strategy are the market dynamics and the current market conditions. Maintaining competitiveness is essential; selling below market value is counterproductive.
I frequently emphasise to my team that buying high and selling low is a strategy anyone can pursue. The procurement and sales markets are highly dynamic and fiercely competitive, especially when Russian players appear, known for their unpredictable shortterm stance. However, their influence is waning as they deplete their own resources.
Yet, the cornerstone of operations lies in the manufacturer’s margin. If it covers costs and yields profits, the manufacturer thrives; otherwise, it faces the same fate as those with unpredictable short-term stances.
Our strength lies in leveraging technology to maintain low production costs compared to competitors. We achieve lower raw material costs by utilising inexpensive waste materials that others cannot use. Through process automation, we also enhance labour productivity.
There’s always room for improvement. I humorously tell my team that if I stopped paying their salaries, I’d find plenty of areas for improvement in their work. By addressing them, I could save on expenses and sustain myself. I’m dedicated to continuously enhancing and modernising our processes for greater efficiency.
We adjust our positioning in the market based on demand and supply. When demand is high, we position ourselves in the middle of the market; when it’s weaker, we target the lower end. But one thing I certainly don’t like is engaging in speculation!
What is your forecast for the FeTi industry in 2024 and 2025 years, particularly in light of the expected shifts caused by sanctions leading Russian suppliers to redirect their supplies away from European markets?
Making forecasts for the 2024-2025 market is challenging, but let’s begin with sanctions and Russian supply dynamics.
Sanctions – I don’t believe in their effectiveness! If I were Russian, I could find at least five ways to circumvent them, but all of these would inevitably lead to a rise in the cost of their materials on the market.
I already see the redirection of their supplies today, with the primary destinations being Turkey and South Korea and certain volumes heading to South America. The remainder is routed through Estonia and Latvia into the EU, where the origin is altered.
However, the Europeans have yet to learn how the Russian market operates or by what principles it lives. It can be divided into several parts:
This is the waste from their own production – as seen with VSMPO. They don’t care about market prices; what matters to them is cash flow, especially when it involves corrupt practices.
This is the free market for purchasing scrap, processing, and selling FeTi. This market is limited, as it has a specific volume and potential. When scrap prices are low, the market waits, and sales volumes are minimal. When prices rise, the market expands as everyone starts selling their piles, which they’ve been holding, waiting for higher prices.
However, both market segments have volume limitations. The wildest player is VSMPO, whose flow is controlled by people who don’t care about the market. However, this volume isn’t significant enough to radically change the overall market landscape, and economic laws and common sense govern the second part of the market.
It’s crucial to avoid having two drastically different price levels in the market, as in 2023. I expect the 2024 market to remain relatively stable in today’s prices.
The 2025 market will heavily depend on prices and the demand for vacuum industry scrap. If demand is high and prices remain strong, they will significantly support FeTi prices. It’s also worth noting that increased production in aviation will generate more waste, significantly increasing scrap volumes.
